Senior Treasury officials like to boast that, after the excesses of the Brown era, they have recovered Treasury values – a commitment to free trade and sound finance. The chancellor has more than helped the process along, but George Osborne also adds the judgment of a savvy politician to conjure up the interventions to serve his political ends. So, despite the narrow room to give any cash away – as a result of the coalition government's commitment to deficit reduction – this week's budget will nonetheless contain apparently useful measures to stimulate recovery, all within the framework of striking a fair balance between serving the needs of enterprise and social solidarity. This, at least, is the claim. The truth is that we are unlikely to see the measures we so desperately need.

What is required is a budget that is part of a wider strategy to reconstruct and rebalance the British economy, overhaul a tax system riddled with anomalies and absurdities while redressing the deepening social fissures that disfigure our society. These include poverty of opportunity for the young, the lack of affordable housing and the emergency of a superclass indifferent to the fate of the wider society. All of which requires a vision. There isn't one, as business secretary Vincent Cable declared in his leaked letter to the prime minister, even though here and there the coalition is doing worthwhile things.

In this model, the squeeze is on, and the fix is in; many continue to make it work, but a growing number of people are fighting a relentless battle to feed, clothe and – occasionally – entertain their family. They are largely hidden from view, not poor enough to be on benefits and in the fierce heat of media scrutiny that entails, or rich enough to be part of a squeezed middle that receives much more sympathetic coverage.

In this hidden demographic is a growing army of workers who are practically enslaved by employment agencies paying minimum wages to people who have no pensions, rights or security even as they are farmed out to multi-billion pound companies in the construction and services industry. Is this a fair exchange for their labour? It really isn't.

And as our giant supermarkets harvest ever-larger profits, a recent report claims that many of their employees are being consigned – by paltry wages and unsocial hours where childcare is difficult and costly – to subsistence living. Is this a fair exchange for their labour? It really isn't. Welcome to the new working poor.

But late capitalism still works, in its increasingly dysfunctional way. Last week we heard that two of the principals in Barclays Capital shared bonuses worth £27m. One of them, Rich Ricci, chose to attend Cheltenham races on the day his bonus became known, bringing to £44m the amount he made in pay and perks last year.

Richard, the father profiled in Roberts' despatch on the working poor, takes home £680 each month after tax. Can late capitalism really bear the strain of those gulfs in wealth? They are absurd. And they are dangerous. The social fissures that have already started to appear will not close over if we fail to heed the sort of messages that these iniquities send out to decent, hard-working people.

Loud debates about small shifts in tax policy attract attention. Does it do much else? It sometimes feels that our political class is blind to the seismic social, economic and political shifts that are happening. They are fighting on an increasingly small and crowed bit of turf as they try to game the next election.

Saturday's Financial Times featured a front-page story about Britain's "jinxed generation" – people in their 20s who can't hope to match the lifestyles and disposable incomes of older generations.

These are some of the challenges that should be occupying Mr Osborne and his fellow cabinet members. Instead, the pressure is coming from the Tory right and a vocal, self-serving element in the business community. They want the top rate of income tax to be reduced from 50%. In that way, the government can demonstrate that it is on the side of enterprise. Neither will it cost much; the tax raises much less revenue than it should, it is argued, as those eligible change their behaviour, salting their income away in tax havens.

But if the tax is so ineffective at raising money, why is it such a discouragement to enterprise? And is the policy locker so bare that the only means to encourage risk-taking is to lower the top tax rate? Britain's budget deficit does have to be managed downwards over time. But the burden should be broadly shared.

The heart of the budget must be an attempt to drive the economy forward. Mr Osborne will doubtless forecast growth picking up after a miserable performance in 2012; by 2014/15, forecast economic growth might even be 3%. But he won't say that this will only take the economy back to where it was in 2008, the longest period the British economy has taken to recover from recession since the 19th century. He should be addressing these weaknesses, but that requires a change of mindset from the dogma that more tax cuts equals more enterprise and investment. They do not, and never have.

Britain is in a dire economic quandary. This week's budget is a big moment. The Observer hopes the coalition rises to the occasion. Stagnation and bad economic policies blight millions of lives. There is a responsibility to do better.

We hope that the government acts decisively – but the auguries are not good.